Bankruptcy Calgary | Making Sense Of Alberta Bankruptcy Exemptions

When Is Bankruptcy A Good Idea?

This page is meant to help people evaluate their circumstances as they consider if declaring bankruptcy is an appropriate solution.

WHAT YOU NEED TO KNOW: Insolvency affects thousands of honest but unfortunate Canadians every year. Being insolvent means that you are simply unable to pay off all your debts. If you find yourself in this position it is important to know that you have options. A great first step is meeting with a Licensed Insolvency Trustee for a free consultation meeting. They will review your situation and show you what options are available. The Office of the Superintendent of Bankruptcy Canada is the regulatory body that licenses and regulates Licensed Insolvency Trustees. These are highly trained debt counselors and the only professionals in Canada that can administer bankruptcy or consumer proposals.

Why Meet With A Licensed Insolvency Trustee?

While we do our best to provide information and answer general questions on our website, insolvency is a complex matter. A Licensed Insolvency Trustee can review your personal situation and show you which options are available. They can explain how the laws and regulations apply in your circumstances and they can address your specific concerns in detail. An initial consultation meeting is free and confidential. There are no risks associated with meeting a Licensed Insolvency Trustee and there is no obligation to move forward or return.

 

A Licensed Insolvency Trustee Can Help You:

Review your financial situation.

Find solutions that make sense.

Evaluate available options.

Bankruptcy – The Last Resort

It is important to know that there are alternatives to bankruptcy, even in dire circumstances. Part of knowing if bankruptcy is a good idea is determining if you have any other options available. A Licensed Insolvency Trustee can help identify what options are available based on your unique situation. Once all other options are considered, bankruptcy is the last resort to get rid of debt and get your life back on track.

Here we explore common considerations and frequently asked questions about bankruptcy to help you determine if it is a good idea for you.

Will Bankruptcy Stop Wage Garnishment?

Yes. Once you declare bankruptcy your wages are protected from garnishment.

A wage garnishment is a court order that redirects a portion of your earned wages to a creditor. If your wages are being garnished, part of your pay-cheque is taken to pay back a specific debt. Anyone you owe money to can submit their claim to the court. If a judgement is granted in their favour, they have the option to contact your employer to garnish your wages (they may also have the option to seize cash from your bank account).

As soon as you sign the bankruptcy documents there is an “immediate stay of proceedings”. This puts an immediate stop to any current garnishment and provides legal protection against future garnishment.

Will Bankruptcy Affect My Job?

It is illegal in Canada for your employer to fire you for declaring bankruptcy. In most cases you don’t even have to disclose it to them. In some cases, the position you hold or the jobs you can do may be restricted. This is more common in finance, legal and security professions.

If you hold a professional designation you should check the professional guidelines that are enforced by the regulatory body for any implications.

If you are in a position which may be affected by bankruptcy, talk to a Licensed Insolvency Trustee. They can help you work through the situation to find the most appropriate solution.

Will Bankruptcy Stop Student Loans?

A discharge from bankruptcy can release you from your student loan repayment obligations if you filed for bankruptcy at least seven years from the time that you stopped being a full-time student. If you haven’t been a full-time student for more than seven years and you are now considering bankruptcy, you can expect to be able to include your student loan debt. In some cases, the court can reduce this period from seven years to five.

Will Bankruptcy Affect My Spouse?

No. Filing for personal bankruptcy in Canada does not directly affect your spouse. Your spouse is only responsible for their own debts and their portion of any shared debt. Your personal debts are separate.

If your spouse has co-signed or personally guaranteed any of your debts, then they will continue to be responsible for the debts if you are personally unable to pay. This is also the case with shared debt such a joint credit card account.

You and your spouse may have the option to file jointly. This is possible when all or most of your debts are shared. In this case you can avoid costs associated with filing personal bankruptcy for both spouses individually. It is important to note that in this case, the procedures are tied together and one spouse’s failure to follow procedure can stop the other from being discharged.

Talk to a Licensed Insolvency Trustee for help determining the best option based on your debt and family situation. As always, there are multiple ways to approach insolvency.

Will Bankruptcy Eliminate Tax Debt?

Short answer = Yes. You can include income tax debt in bankruptcy, but there are special rules that apply. A trustee will be able to review your situation and confirm if you can be discharged from your tax debt.

Generally, the CRA will not accept anything other than the full amount for any income tax debt. If you owe the CRA money, they may be able to freeze your bank account or garnish your wages without going through the courts. If you have a business, they can also go directly to your customers and have them pay them rather than you. If you are insolvent and unable to pay, declaring bankruptcy with the help of a Licensed Insolvency Trustee is one of the only ways to eliminate the debt.

Will Bankruptcy Stop A Judgement?

Short answer = Sometimes. If the judgement arises from a lawsuit involving unpaid debts, the lender or creditor may be able to garnish your wages or access your personal assets to satisfy the judgement. In cases such as this, declaring bankruptcy would stop the garnishment and discharge the debt. If such a lawsuit is pending at the time you declare bankruptcy, it will be stopped.

There are non-dischargeable debts that may arise from a judgement against you. In these cases, declaring bankruptcy will not eliminate the debt. Non-dischargeable judgements can arise from issues related to:

  • child support or alimony
  • criminal penalties or fines
  • certain taxes
  • debts arising from fraudulent activity
  • death or injury caused by drunk driving
  • willful and malicious injury caused by the debtor

So, judgements arising from regular unpaid debts can be included in a bankruptcy filing, but judgements arising from criminal activity or child/spouse support cannot be included.

Will Bankruptcy Affect My Car Insurance?

The effects of bankruptcy on your auto insurance are minimal in Alberta and you will generally not have to worry. When you declare bankruptcy, it is reported to the credit bureaus that determine your “credit score”. Some insurance companies in Canada are now using credit scores to underwrite auto insurance policies. The practice is different in each province due to legislative restrictions. In some provinces, it is illegal for an insurance company to use your credit score to influence auto insurance rates. In Alberta, an insurer must get your explicit consent prior to looking at your credit score and you can say no.

If you are currently receiving a discount for having “good credit” you may no longer qualify for the discount.

Can Bankruptcy Stop A Foreclosure?

No. Bankruptcy in Canada does not include secured debt. Your mortgage is secured because it is tied to a physical asset (your home). This means that the value of the mortgage is guaranteed to the lender by their ability to recover the value from your home. If you stop making your mortgage payments the lender has the legal right to foreclose and recover any amounts owed to them.

Declaring bankruptcy will not stop a foreclosure but seeking help early on may help you manage your insolvency before it is too late. In most cases, as long as you are able to continue making your mortgage payments you can avoid foreclosure.

Will Bankruptcy Affect My Credit?

Yes. In Canada there are two major credit reporting agencies, Equifax and TransUnion. They keep track of your credit history and provide reports to lenders. When you file for bankruptcy it is reported to these agencies. If you are declaring bankruptcy for the first time, it will be included on your credit reports for as long as seven years following your discharge. If it is your second time declaring bankruptcy it will be included for up to 14 years following your discharge.

Equifax uses a scale from R1 to R9 (R1 = perfect credit). Declaring bankruptcy will result in a rating of R9.

Will Bankruptcy Stop Bailiffs?

Short answer = Sometimes. If there is a judgement against you for unpaid debts, the creditor can begin to take action towards seizing your personal property. This is done through a Civil Enforcement Agency that employs Bailiffs to collect on your outstanding debts. The Bailiff may be able to take away and sell property such as: your vehicle, your home, cash, luxury items, and jointly-owned possessions. In the case of unpaid debt, filing for bankruptcy would discharge the debt and there would be a “stay of proceedings”.

Civil Enforcement Agencies can get involved for different reasons, including unpaid child and spouse support, court orders (mentioned above), parking fines, unpaid rent, and unpaid taxes. There are non-dischargeable debts that do not go away with bankruptcy. These include any judgements involving:

  • child support or alimony
  • criminal penalties or fines
  • certain taxes
  • debts arising from fraudulent activity
  • death or injury caused by drunk driving
  • willful and malicious injury caused by the debtor

In these cases declaring bankruptcy will not prohibit a bailiff from continuing their duties.

Talk To A Professional:

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